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More Wealth Means More Desire For Control Over It - Study

Harriet Davies, Editor - Family Wealth Report, 11 January 2013

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The more money you have, the less likely you are to want give full discretion over it to an advisor, a recent study from the Institute for Private Investors suggests.

The more money you have, the less likely you are to want give full discretion over it to an advisor, a recent study from the Institute for Private Investors suggests.

Only 32 per cent of families under the $50 million asset threshold are comfortable giving full discretion to make portfolio changes to their advisors, and as asset levels rise this percentage drops. Over the $200 million threshold, just one in five families gives their portfolio manager full discretion. At this level, 44 per cent allow limited discretion and 36 per cent say they must approve all decisions.

Mindy Rosenthal, IPI executive director, said the financial crisis had prompted investors to realize they can’t “abdicate the ultimate control for overseeing their wealth” to an advisor, and that a clear trend is underway towards investors taking an active role in their wealth.

IPI, a subsidiary of Campden Wealth, offers educational and networking services to its ultra-wealthy member-families. These have minimum assets of $30 million, and four in 10 families have assets of $200 million. The Both Sides Now survey was based on 75 families and 14 advisors.

In-house investment staff gain trust

Investors’ perceptions changed, however, when the chief investment officer was an in-house employee. Across the families in the survey, 36 per cent of those who employ an in-house CIO are happy giving over discretional power. This compares to only 10 per cent of those who use an external CIO. Internal CIOs are often well-known to the family, or in some cases are family members. The majority of investors (61 per cent) use an outside CIO.

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